Social workers and local authority panels give greater weight to the "permanency" of adoption, rather than the love, stability and family links that grandparents and other family carers can provide, the charity Grandparents Plus said.
Its report claimed many older grandparents were fearful of their grandchildren being taken away - which prevented them seeking help.
There are an estimated 25,000 grandparents over the age of 65 raising 30,000 grandchildren in the UK, often because of challenging circumstances, including parental alcohol and drug misuse, abuse or neglect, imprisonment, bereavement, disability or illness, according to the report.
If the children they are caring for were in independent foster care, it would cost 1.4 billion in care costs alone each year.
The report told how older grandparents faced prolonged legal battles, lack of support and financial hardship as they fought to care for their grandchildren.
Sam Smethers, chief executive of Grandparents Plus, said: "This research reveals the hidden contribution made by older grandparent carers. But it is worrying to discover that many who need support are too scared to ask for it and, of those who do, most don't get the help they need. There is a fundamental lack of trust in the system, which needs to be addressed.
"We found a range of problems - from ageist assumptions that they're 'too old to care', through to poor-quality assessments and care plans. Yet we know that older people do make good parents for children. They have a wealth of experience and can provide children with love, a sense of identity and belonging."